OSH - Earnings call transcript Q1 2021

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Operator

Good morning, and welcome to the Oak Street Health Fiscal First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. We note that today’s call will be approximately 60 minutes in length. Please be advised that today’s conference is being recorded. Mike Officer. Executive are Cook, and call Financial Chief today’s Pykosz, Officer; Chief Tim Hosting Street release, section Oak available website. The press on materials other the are related Investor Relations of Street’s webcast Oak link and statements management’s and subject reflect to These XXXX, risks, uncertainties and this views made May expectations as XX, are and and time various at are of assumptions. that future, not This to call past related contains is statements forward-looking statements, events. and performance often often address words our future and context, financial believe, this financial conditions plan, potential, anticipate, estimate, forward-looking statements as target, predict, In could, project, similar or expect, contain expressions. would, may, business such expected continue, should, and contemplate, or will intend,

matters Forward-looking different are to statements, address degrees, by their that nature, uncertain.

limitations materially to Securities are statements different to our for of our of with to us, not statements. management a customers XX-K a our the expressed non-GAAP in annual a our the of results those include our financial that market the reliance our the see our differ from ended be number our portion materially our or prepared retain that measures particular of financial competition, year non-GAAP substitute are factors of cause the on measures. for competitors actual with these XXXX, use and of Exchange For by related you uncertainties maintain accordance forward-looking measures than in customers to the on substantial to could expectations ability achieve addition and superior cause measures. includes limited as for There profitability, and future and refer estimate as revenue, number a results existing in Company’s report our increase could existing ability This financial our market, increased of performance a of of to or and GAAP. new effects our These non-GAAP in growth, as call financial ability Form Please and these actual size innovations of target to market to number well customers. to December XX, our Commission, to discussion filed the will and where opportunity

differently. appendix that, titled our Street. For example, non-GAAP call earnings I’ll financial measures the release companies of calculate to go reconciliation Mike of non-GAAP of the may for Oak similar turn financial GAAP measures comparable most Pykosz, CEO ahead. the Refer With measures. a other over to these directly Please to

Mike Pykosz

thank everyone is Thank you you, morning. operator, to that and us this joining

country, addition Financial today’s to tirelessly over Cook, vaccinated work I’d our vaccination in weekends once and an call all-hands-on-deck like opened vaccinating has additional we to is serve. we Chief positively drives, as adults peaking, open Oak kept on communities. was our serve the who the when and and members nights my patients society and case demand on the this drop communities older in support the impact early neighborhoods spring numbers comments Like and in to time and facilities improve normalcy. to we to most access Tim counts An it our our is of vaccination up during This our transition Street effort. Officer. patients our XXX,XXX again time was we effort community administered vaccine XXX,XXX business, fully Oak over rooms exciting to people -- doses. start path me Street continue at an on continues a and by the Joining to thanking team of morning COVID back

by the producing most of with majority communities lower-income the minority our efforts, impacted COVID. our vaccination populations, our help equity care serve primary Given large like centers just communities in model,

transitioning front. normalcy operations Looking back to forward, the we are on

call our and centers, our most of remote, process were moved are team back our that for into have centers. beginning members We that

will positive While remainder for tailwind the for a teams opportunities efficiency our over person will quality from relationship in team an some and being of building for after create person and our perspective We in obviously, year development for adjustment working the across being we of an excited are enable a members year. teams. remotely, believe the

also cautiously resume events. We’re beginning community marketing to

trends largely social cases. While of and that those are continue consisting events at time, the declining hopeful and we we outdoor this distance are vaccinations current of

We greater events number and of months. will coming able variety to the execute a be over

to acquisitions, and trend, as a are patient we are that will year seeing We our that continue continue as progresses. hopeful reopen, progress the on communities as

model, to care the system amounts model develop our model, data market and our to and workflows our Canopy, developed in Canopy help aggregate patients, heard This our it’s and data the you A care patients. for today. continuously system of customized care proprietary care day. us of of to me we only to many internally key us use refining, say, scalability of powers use center and the execute same every are that providers’ to disparate turn single all of massive every our we As technology to every across effectiveness Canopy we all in day. serve enables every which able us we’re allows in teams points. across our Since live best-in-class Medicare the patient

the review real Oak how Street, to periodically it hear been other care value-based have who to the seen. refreshing versus provide work gap time models, from reports after clinicians to also having patients necessary We technology have is new in information

share I great from points impact on per are team. Canopy. of importance want usage four couple indicator the In our to Our of QX, to past of Canopy data months activate the a Our external providers hours Canopy’s average two statistics day. on

accuracy to Medicine of of published a study patient algorithms Journal our judgment. the England showing New Catalyst The position First, compared proprietary risk just

unique to and the incorporated X.Xx, machine using Compared Canopy judgment and Oak which fields, technology. emissions X,XXX mortality prediction Xx by algorithms, Our accuracy log, were to algorithms respectively. Street, over many learning data provider developed improved of

application Breakthrough’s awarded Canopy Our Award. MedTech was Second, recently Innovation EHR

expanding XX to centers and track we centers additional of in this in continued first Kentucky will on and also the investment Louisiana in to opening Georgia, base Alabama the Carolina, open to We’ve South X across Canopy, our new markets we announced our XXXX. X new and quarter, center centers states In addition and several to in over remain expand future remainder likely also year. continued XX

as to of continue ability confident historically maintain at increase effectiveness to, We feel in unit we’ve to well the pace as channel our of economics our sustain a expansion. generated as the minimum, we our ability

opening and as in the exceed economics, new unit our is our we vast. each white maintain As meet long or improve experience we as pace market and year our space results historical increase continue our center patient to and clinical will

Street comprised centers. a over Medicare As reminder, can XX,XXX beneficiaries million our of market nearly support XX is and Oak

capital April went growth raised support the of Direct Xst, as Given convertible officially strategy. we part the CMI have $XXX during quarter model. we million our our note On offering, the participating significant capital to ample Contracting we in

financial As Advantage. for to were the covered a of Medicare reminder, by Direct Medicare. patients by Contracting to risk care to program Prior Direct crucial will risk covered patients enable able only for with Health we Oak assume cost assume Street Contracting,

ability grow moratorium patient QX not does patient our plans. Medicare new in related X,XXX the would This our from initially expect and footprint. patients We we us demonstrated we taking and reinforces we in moratorium historical with we risk CMS that the our patients in contracting will Managed prevent Contracting we on revenue confidence current our adding XXXX, similar count. estimated. economics by announced beyond and medical risk to suggest data care, be as Early our have patient Medicare from expect through make recently investment grow markets potentially to Direct to QX program, drug those serve traditional received applicants. costs taking patient the per QX better That in to a success and to working XXXX to than that approximately new benefit

to record results. representing XXst. of at-risk XXXX. guidance QX turning And growth of for growth million QX growth a and spring summer investors QX to exceeding the XXXX the the compared patients XX% comparison and cared the like in $XXX as We’d Finally, growth in to to low quarter, of spite effective the in a is XX,XXX XX% pre-COVID high COVID is revenue the of XXXX. point XXXX compared revenue for in quarter XXXX. March QX We of out communicated that to off generated end quarter in QX we We

our are center patient we excited expansion that patient detail. Tim? will growth will results, walk Tim In our the be our by and a Street. We patients. to Contracting future. for Cook, foreseeable confident exceed through Direct turn Oak time for opportunities, continue summary, and MA economics XX% will exciting in now very, at clinical financial our results encouraged more our very momentum acquisition and both quarter-over-quarter you I very over to it we patients who It’s

Tim Cook

you, good our morning, the high had quarter as provided Thank guidance end in and we the Mike, delivered first with We pleased March. everyone. we results were of above

at-risk In XX of December X year-over-year centers million. year-over-year, end growth operated of revenue At XX% of operated million our patients. Total at quarter, centers, to at-risk the XXXX, of terms end XX% first XX, patient first $XXX.X we in quarter than grew the base, base. representing XX% XX XX,XXX more drives Capitated of increase by to the and XXXX. which our by financial membership, $XXX.X of XX our grew driven grew performance, the centers revenue to we patient the an compared

was strong growth paid for capitated of but a included will the Oak XXXX $X.X retroactivity increase Our previously was rosters. patient where our revenue first million not base. at-risk I our payers note patients managed revenue XXXX, on by in XXXX in the that primarily in patient of quarter to related driven Street catch-up

million our XXXX, quarter expense related of patient XX% mentioned claims million was XXXX. related quarter retroactivity. of of $X.X primarily first to of first the quarter the represented to XXXX for medical previously expense of $XXX.X Our growth compared medical to first claims

was quarter, million an growth patient an increase in in the an was excluding centers. to larger in approximately amortization support care, first of compared year, increase first XXXX and quarter larger for Corporate, expense, driven which expense in increase related year-over-year. $XX.X to we during million of of year-over-year of the XXX% general the centers our quarter, in versus and operate first The support number in as increase and invest was million prior $X.X increase footprint growth cost million the first to area team year-over-year G&A of administrative this to members $XX.X and expense the XX% to quarter more we Our this representing compensation XXX% much our represented stock-based by of depreciation marketing of is majority the quarter, $XX.X XXXX. $XX.X base. million first of continue patient Sales of and the expense of

related primarily in not to an is As compensation our IPO. prior August to and issued accounting XXXX change issued to stock our related awards a of increase function IPO reminder, the in stock-based awards since is a

will medical year-over-year administrative claims quarter expense, continued growth our now Excluding was we first useful necessary evaluating stock-based in I we metrics during expense quarter. million the contribution, quarter an to XXXX, compensation, Patient by in the capitated million of increase compared performance. which find grew $XX.X the that driven general financial support XX% non-GAAP $XX.X three to less define first of financial and XXXX, XX% cost to of as of the discuss first business. our corporate revenue

as sum patient was the and define an increase the the total Oak platform. Platform of excluding that our year-over-year. million, per at-risk expect We part of which patients and claims improve revenue expense cost care, XX% less amortization, depreciation medical contribution, are of $XX.X Street longer to we of economics

liquidity amortization, costs XXXX. dollars center in XXXX the over stock-based contribution platform fixed but of first loss, of EBITDA, quarter to excluding which of was associated the other a Adjusted we to by both position. $X.X compensation the net margins well individual $XX.X with matures, our first leverage and expand with As finished offering-related we we depreciation We as strong patient adding quarter and and economics income the quarter to improving sheet million million in our loss balance calculate as first centers costs per as time. compared and of expect loss transaction a

$XX.XX in aggregate During a million an interest initial price rate due of we XXXX per at the conversion share. notes debt $XXX quarter, successful completed convertible with a principal in issuing offering, X%

conversion a net Our used proceeds after which We $XXX.XX purchase portion per million. call, $XXX effective issuance to capped the these of proceeds a were to costs increased price share.

held XXst, approximately As of unrestricted March $X.XX cash. billion in we

XXXX $X.X Our million for by initiatives, were while will liquidity our quarter our position was $X.X novo support expansion. de primarily quarter. in growth center first continued capital our of million activities the Cash operating of the used expenditures

our financial outlook. Now, I’ll XXXX to provide update an

a XXX,XXX including guidance of our we’re fiscal at-risk patients. for Direct to total increasing XXX,XXX our range Contracting XXXX, patients For to patients,

a increasing We tightened $X.XXX $XXX of to a are full from to while has been range $XXX of billion year adjusted to EBITDA outlook billion guidance to loss prior $X.X $X.XXX of a our million revenue our to guidance of loss billion billion, million. our $X.XX

expect to by December centers opened have XXXX. to continue XXX We to XXX XX,

number XX, are final patients questions an XX,XXX Direct comment having at-risk second in including of range to stock-based as XX centers XXXX, received the we this million $XX count expense a loss forecasting at on I’d Contracting June in $XX regarding and to topic. EBITDA compensation $XXX patient patients, million quarter one make of million. XX,XXX an revenue of XXXX. like For of to million adjusted we’ve the XX to anticipate We $XXX of to

mentioned at vast as pre-IPO converted compensation XXXX. cost driven I XXXX QX of line vest that That accounting as increase treatment was was back uncertain the to this dating quarter earlier, of awards our a by majority between line reflected stock-based the time XXXX. IPO. vesting the full vesting defined awards and in accounting the August from XXXX far As an treatment. These quarterly of August first time for

reflect we compensation equity expense August Operator? at we’ll back significantly until And turn elevated over stock-based these expect our compensation. are compensation to to market remain some call expense with expect the XXXX begin By And stock-based expense to August that, expensed. to of will of operator. We take the awards I’ll when as taper XXXX, the fully now would levels questions.

Operator

Your from Instructions] [Operator first here Sachs. Goldman Jones Robert question from comes

Robert Jones

an that to already I a for I get And Street, wanted some program program. the specifically, just was Oak think better to prepared around wanted the Great. you obviously, applicants. potentially sense on CMMI’s made opportunity decision entity you Direct as program. how remarks Good of better the the Contracting. mentioned comments morning. approved for you around the ask Tim then, as close new to affects for it view that And economics in

what specifically or economics those for better Street. Oak drive Just would present curious

Mike Pykosz

Yes.

their our the within one, in to decision think first as any the On as to we far on we’re continue new already pause the then don’t program CMI since to will that have applicants, and ability impact and expand us program.

at relations experts Street. bipartisan step and moving of We’re supporting with Obama But, programs kind when models program, back, certainly at the value-based very the it of not look take even Medicare. deeper I kind providers a government traditional of and of Oak line the you is here administration deeper kind think the certainly and care into much under in

about new It’s me be took really -- to want before a make support a administration the of that my is at round to just program of understanding that just applicants. So, think the understood they related and of was another people program less my to it’s what I around least they have the kind sure program. more of inherited around much implemented

as think, far we of So, and I about least around your really we the understand the lots again, at within anything unexpected ongoing go. today, -- as I feel the viability that of program from that’s program good economics, economics question what it’s the the our think going position the forward. second To I think

there’s I just a a new think when there’s question program.

seeing UM higher, some around start in. revenue government it you you plans portion we’re that the historical the lower a You patients per be through, you’re And I more in to to can So, a Medicare claims prior the very in the our talked say like and calls we but and Medicare look and kind health will revenue on similar today our program not amount the trying although until what fair Medicare networking this it the traditional program of flow are that program in in think the plans cost. of triangulate about to to around compared obviously I totally is that do theory, managed Advantage, right? Advantage. a paper what -- care because keeping increase smaller seeing pull Advantage levers this real you start sure, is is very of belief to have we of look successful do won’t levers and is premium, a because costs will patient will which similar expect that try But, would

a I amount we of the program point important our spent care into until Medicare I coming get and a the because model strong care kind that’s Medicare costs always it a it. kind patient higher revenue care. our program rewards of traditional on do and obviously to big the kind position about patient And the us, to same similar win as Advantage which started, contribution, really in well our we But think these their net for to think patients. from think provided a Medicare perspective, we’re we’ve why across our higher patients, economic what in this along of -- the population, able investments now, such you will make we’re we for with see we of is so, Advantage very but patients. But And very

Robert Jones

improve that -- the you new organization center year as center increase new economics continue able year. openings experience, clinical you’re and openings follow-up each consider as to each comment to Got road. maintain want the that far a don’t it. if around the to plan the long openings. And I as centers you down too a just get could But ask for an unit I to results, patient and made

new any beyond? how forecast the and and the opens that in if How XXXX to about important thoughts metric you given initial just you’re thinking model. is center curious have Just

Mike Pykosz

Yes.

about a centers, think increasing we think, is new titration. I almost

And year, So, level trajectory want we’re you in to we’ve guys want to so, open XX% ago, year that we I actually X go get seen out economics going. more a the through own shared, unit X of year. with continue think, if and and and year. annual happens, If on level and economics, we’re of we or next we trajectory up months this then open improving improve do our we of to our a s couple same up vintages. calls as unit But, keep our prior or many to that in centers, call year-over-year going we’ll we right? really giving not XX% the a range the times to And

So, risk really you Probably, expect up to bottleneck. I next open or we? something year. a but don’t XXX XXX becoming unexpected then think Could

So, more something I about of XX-plus. to think we’ll from over it couple around last saw now XX, think we’ve we XX where the to gone like years,

not So, titration I number. increasing quadrupling up think tripling similar really levels you’re year every the or number, you’re where but the of

So, out the something just about similar take it. in we that and of the if trajectory think year next you kind and after year how

Operator

from from next of comes Stanley. line the Goldwasser question Morgan Your Ricky

Ricky Goldwasser

forward that how now economics impact have then, year. see align that. patients you quarter on you population Hey. the after the of on follow-up aligned What one I guide. question claim we that going Contracting, a move a think Good the And do to voluntary have -- I and specifically congrats about higher manage? patients morning, for on and as Direct follow-up this on patient

Tim Cook

Tim. Ricky, Good it’s Thanks Sure. for question. morning. Hey the

updates in revenue of claims methodology of for as there last they you next how patients. aware, will aligned mentioned part you And are and those patients several in over that difference in is voluntary year. calculate aligned folks the year from mentioned each CMMI the As become the a for one program some that are weeks, the

that change managing it with not feel as you those essentially that you reference calculated that effect is But, we long patients have the to center, economics patients so, level of I in and pertains in were won’t will score as level the managing go intensity by today. patient details same here, based looking so technical engaging, Ricky, because change, reference for as right, were And same managing actually the a population. you risk upon significant the back our of And the here. the a year, of into seeing the that the on to that way though for intensity that do

You patients serving. shouldn’t overall you’re the the impact or expect of on a risk significant for portfolio

voluntary from into population consistent has or to care been since do patient as and aligned, over comes risk Mike they so, this cap as We time. effect. our perspective, So, across earlier, though patients mentioned our our as feel from model when claims our move

As population. impact given compared to on fact less that historical an of the us, well-managed that know, that on cap was is you a baseline

Ricky Goldwasser

say, like on has -- care last activity care, the system. they in kind upped then, making the telehealth follow-up with Walmart. a in and its I’d sort in activity how is Walmart few buying And some relationship launching my question the of asset role overall comments in of health weeks, around the health really the view

can sort updates the Now how you have observations that does or And with with share playing out? sort up the any Walmart the you do see you -- how running, opportunity of overall, centers and us? of

Mike Pykosz

Yes. Thanks, This is Mike. Rick.

remains, it’s than we’ll an the just Oak got ramp they better with they we’ve do be it’s of Street centers think the centers sustainably we no of by think not we’re so, And about partnership why we’re still same us, And the centers. at an to the to just doing ourselves, the putting so since hype, Oak we think far. liked for I I think, be that have encouraged I couple there’s first think, it’s better. -- for talked But and hypothesis equal remains from Walmart, last Walmart to fall, about months approach I to it, And Walmart. as Street of just And hypothesis. Otherwise results is Street we test these think, announced Health because I And be kind that. Center right? kind better strong. which the got of Oak can’t new, as criteria I and goes, the are far

I well think together. really work our teams

scaling it’s guess, put differently, huge centers, really good. a so But supposed be such market, and feel novo said to far, we’re de such so -- like So, again, a it’s our talked the we maybe to there’s ability to we of continue up the not far I individual improve as and and opportunity massive to like as as more -- goes, as well we both, more as up just results really have about every every the feel vintage centers year. we put

can and need trajectory the go And just thing we to so, don’t time. a a is for rural have nice that keep markets doing be And I while we more that little to grow very, Walmart incredibly successful. very, really, period potentially to growth very and of strong long very faster, a think, some loves

the is chasing high, pretty right? a business So, not We’re opportunity. bar really

opportunistic can we’re being think it to level. that take I another

to sure around make of have So, a we we want conviction lot that.

the So, employees number opportunity is that’s how right? help -- we’re done looking to today. is as find you Just of know, massive, they at the Walmart, Walmart’s itself. And

keep going in But different that And Street. Oak they’re what a so, the we have front, obviously, number telehealth investment. is an that And made I do obviously here at than think opportunities. they to investing on different also very of

we’re opportunities decision made are plenty going but them, of about I a obviously forward. to to So, what of optimistic still and think, do those with work there’s centers, we going having

Operator

comes Your William of line Daniels Ryan the next from Blair. question from

Ryan Daniels

talked the events. you that, that back assuming as comments, community you curious did continue of year, hope the year, prepared you the about some marketing little and the to Mike, of things of XXXX? up into normal half initiatives amps And stabilize I’m the bit community to go will a reallocate more I dollars your we wanted with marketing, to some with will last through resumption pandemic, you with a maybe with digital the to continue acquisition along back towards community member or go

Mike Pykosz

Ryan. channel patients bringing kind Definitely Thanks, The threshold. is acquisition of in below the Yes. latter. of cost our It’s working.

our strong of that of up. ratio at has we’re to when as ratio. still. to amount of comps obviously again, channel Now, acquisition within the other because capacity we CAC we a look long centers strong that our And fill LTV kind large in doing as going industries, can we have really cost is a And keep

want And closer you those when economics to that We we the So, centers full. centers bring get want you sell forward right? sell channels, kind if you of see to keep obviously to doing centers faster. faster, positive

and -- thresholds, I is certainly against spend we working to cap something below So, our is no working digital and don’t have it. the if plans lower

we’ll think, we find finding marketing ways And positive incurring said, we that. to today approach. we -- to I’m do can absolutely CAC, dollars marketing will the sales to that. I we more and cost are if our at work can put keep opportunities hopeful do of That community

society getting better and every to as and they there in outreach to them kind They’re as more reopen, meet We more working continue pre-pandemic, every not month. opportunity were we have think, call have get people, and continues out They’re field I our XXXX they’re I think but our effective they -- they’ll But, of effective. as executives to more more on-the-ground team. in They’re now. today. center right

-- and to having incurring increase field that have and up and sales a we world, as a certainly already both, more to think can of get we’re see sales base and marketing, without significant because so. in do digital I I having central we best will the actually we invest channels cost. and lot our guess our So, our and opportunities running up of But, central other both running marketing

Ryan Daniels

about this quarter. then, an planning my color. talking I those as you for some helpful wanted programs of follow-up just update initiatives you’re time year. That’s to that question know Okay. some on spent get And and the investments new last clinical

So, any progress can any if there, early rolled love on offer? guys. any to Thanks, update results? I’d Just get color you have an out,

Mike Pykosz

bit new of around give a it. more some rolled stuff at to stages context Street more piloting opportunities. a updates constantly methodical of are are some just great program, we’re They’re when being bunch and all do when the care little in program about behavior our sure about we disciplined of very the out. additional them focused at wall various what and health really, program. home not the And think dozens you of we throwing process means, kind what in really and is of but what Oak making that to [ph] But, Street, in a on They’re we about a the Oak we evaluating program and seeing sticks, really ESA

well, to more to When it’s cetera, sure management sure kind going five the three to things make it? we’re to through, do we’ll more then kind test. so, of we into need We to to et have confident And If program, broadly, develop need pilot roll that cetera. works need beta sure the If dozens we we roll make we incentives integrated in we we the across are out the of do aligned et -- most out report well, data. make of have Canopy. And teams. the the think can pilot we broadly. of feel center. a are out what works How We what them the hey, about? do, change work that

markets. just the which results about run we them I and not Again, who across all we that’s really every very a but center important programs, across and it’s So, it’s these them. need Oak tell comprehensive have vintages consistent application of think day drives process. of patients is every we really the thorough consistency the one parts model, And say a pretty the different of and Street

to in. where programs in them them process now, the have said, we depending rolled out are so, are where we’re of those right results different really And on none we stages. the I But, in get stage now that of fully which

think optimistic in they’re still it’s pilot for not victory, declare are the results good. initial operational too we fully mode, I So, and pilot that kind ones are But, the of early to yet. us remain and certainly

Operator

Your from Piper line of the comes Sean from next Wieland question Sandler.

Sean Wieland

comments Canopy, is ability of on made mortality My on admission and to predictions. specifically accuracy its improve question the you

down offer that? makes a And you centers, little algorithms markets, what predict more in the Just patients? the what or maybe if detail we can to forecasting do secondly, your go ability are there inputs exactly the and bit algorithms of new ability economics risk to new into even those these to on either unique of these do

Mike Pykosz

Sean. Thanks, Yes.

Oak So, the I whole the one think much than I things the But think greater that is so impactful and of sum effective makes I’m of quite Street is parts. biased. so

algorithm I it’s set actually apply ability doing something really about of learning a machine learning data to do big differentiated trajectories then about many drive data to action with so, not out it’s machine set the set. a and and for really the then the data that And and on just change organizations can but comes mean do, what create patients. that’s

of about think elements, types and you data data and your care the kind if things so, claims and admissions And health claims some are that we data was some of around with of are basic nature, the of a demographics. basics time points because patients a But like them we are an are the intake things lot about process. on of that understanding lot spend

an ongoing us patient that We all of that. process spend very on and times a time amount systematic a on new allows And first that patients, information in X to as the have do patient well the thorough kind of So, of through. than know patients go average. with like intake X.X to huge really our much gather and months we get we

system, them of and cases, use through to things and processing efforts we, We records kind [ph] here’s coders, the who we have in will read med nurse of patients. to for and coders risk factors have read and determine huge records kind like national gather med across the that the the some

has different Here’s activity, et cetera, challenges, illnesses cetera. cetera, patient or et why chronic living et different that

So, really the can all information gather. for sponges we

pretty don’t. information work some some stage, those a exchange, health that’s well; they stage, at sometimes And

-- mean, those only plays the there. and them it’s and the We’ll health I the care So is industry I get from we’ll offload know factors go in, and that fact. digitize

lot on really obviously with and from we’re of what we the in average spending first doctor. a then, those with we’re at So, gather all doing spending time patients, party we more patients information information all third their the time the time ongoing, significantly Street. And are is Oak our can our gathering, plus patients

judgment pick data subjective things right? set. they’ve We can’t doctors. that sometimes seen spending their We’re patient, because We of set lot a and can. that data there’s of doctor that our use doctors want the really them is up part with judgment to data our seeing differentiated a And of that, the a want patients, creating time

more And together, a the England just put the share. do all at, going yes, we and before two risk in than which article. level really of Because Journal so, can investing you the that okay to can Medicine and Those other we learning can risk, that spend about this the better readmissions cycle, look of and It market hey, population. you at And That’s And much set. right? on lot But two the then, more we those in certainly predictive. that’s for data we’ll the out, there’s you intervene, get risk them So, been -- right? we that a our keep you they can got use risk than data our false Catalyst it figure understand front will the the machine the it’s and and patients more more can obviously is creates pretty example, have a we even the more patient model, a other places. if then more also unique who’s patient to better the then And positive happen. because are things we then the we risk, and If delivered, it resources challenges highly New and just published level use today patient that is where we and more I points kind data algorithms that the or can that’s these on. are things other understand center -- we we predict focused set because care analyze factors can real, of that’s in identify right hospital positive. pinpoint some more at intervene you ones are can

how about but I an something results. not necessary kind think So, we science this that’s component, get to machine the kind of think And sufficient working. is and those it’s but it’s important of models learning data again, of type that

data. the pull ability that in three You to difference. beginning, ability in a and more all and kind of different types make then But to big of the act the really have also upon you need those, if you need data you can

Sean Wieland

Thanks for that.

-- be the and the better you reading two related thought those in saying than of no? much So, statements Are economics is too algorithms Contracting? into Direct it your commentary predictive the elements this, will you then, am I or around

Mike Pykosz

and the costs. our They’re them generate of able surpluses strong related in the we’re to keep really to patients, able to we are the which fact identify one patient is reason we’re act can healthier, that reasons drive able to right, upon at-risk obviously we is only on because medical

One manner. risk, reasons of much our allows in have upon of kind model identifying to improved care over more is who’s we effectiveness we and systematic time, using the that act and at are more effective and data right, us Canopy at a

was today better is wasn’t Street care years better even or ago. and really it than years bad it’s it actually model X today. So, Oak It’s or but the good, X X X

part driven algorithms. Tim’s more really in algorithms data it part lot So, one and my right? the -- by things, Canopy outcomes data we that not actual in real didn’t But, is customer aren’t algorithms the are it’s and Medicare I think those surplus predicting -- not -- these of that’s the yes, the things med Direct our predictive not Like -- cost Contracting. act, of by finance, to hey, are but have traditional driven so, of saying, they -- in that great we not for there’s therefore, used patients a the improvement and for those improvement about doctors. And the our drives extent, patient the

Operator

next Your America. Kevin Bank the of Fischbeck comes question of line from from

Unidentified Analyst

quarter, Hey. Good I is the about follow-up Adam a for This morning. have Kevin. question A on quick question. then and

With related it and due the guidance EBITDA? to was raise, how revenue sequestration to of much

Tim Cook

we a sequestration of the revenue a for extended received perspective. holiday plans year. was know, folks as bit a So, from speaking, Typically that revenue is -- the of the -- sequestration reduced remainder through is pickup of XXXX X%. from That by from -- our just the QX

of pickup we So, the a last for before. the there of relative quarters year is had to bit what three a

So, increased it’s degree. in it medical our to for the there year. costs included And also a

year. small. incremental net against and impact It’s relatively impact, essentially our is think EBITDA from I So, MLR the a sequestration the applied benefit for of the revenue

degree in the there that impacts business. it to sequestration our So, is

Unidentified Analyst

were of So, ex kind line? things in tracking -- that, was it

Tim Cook

Yes.

that. We So, it’s this are at -- only at May, early look, May point, right?

of much update remainder metrics learn So, you see of we But, as increase all for can the things continue the we for continue the I for very from about pretty the year, to all optimistic a develop be by the in and -- prospects you how perspective. the to think remainder guidance more. year the tell we’ll as

Unidentified Analyst

mean signal to the was to kind come. small of -- going just kind cash $X but statement. with balance Okay. of kind of small, that the I latest more really on thinking It’s was sheet, really And a obviously flow is, my see these there but actual a and wondering that’s of cash new million all we’re if M&A, around then of a the question deal, acquisition what more

Mike Pykosz

Mike. is This

on we’ll think think, I be I take continue front. can a to M&A And the opportunistic of lot different that shapes.

a small about kind are what does. Medicare Oak truly business, as parts. And that the not whole we’re So, M&A a all of full, of the right? last to it think effectiveness overlay need an is that. much, patients closed when beginning buy model in practice doing we’re believe believe the the run on, question lot right? Street focused kind just those people on we very integrate. of That’s it practice and And the key I going sum in We its in and care be There is front, of having that it’s on not case, We parts. our is than to run things have and where only to parts. we And what greater of I said much a having we

of just kind patients that normal have model and we our can’t all doesn’t staffing of And normal group different sees means work. physician of on put with kind so, That age top. that a just and

that do we see keep the commercial cases, some Medicare practice and we and patients, And lack in will acquisitions, but patients practice break -- take patients where so, and the separately. -- the them a for case then younger apart running in the

down wind the of centers. see our will we the practice Sometimes out Medicare patients and

couple find and see they And a to there’s So, to looking them can built believe the to a really to Oak way they’ve a great of as is we keep medicine. works the for model. key check they medicine try not to different with this. want part differently, compensate and bring because in a on a fit the built. patients practitioners, but very us it patient-focused the Street. They’re just -- we what as We Street that want what make can a to our then They way of that in we perspective. upon practice. for effectively, execute to but independent -- be doctors practices Oak But, it ways with for culture That’s going we need from practice

obviously can what There work along we they a a is actually was and small just we’re practice. patients love their doctors us to doing. found said, relatively in who -- were way was of the together. naturally. Medicare you’re very case the referring, one careers. was far mostly Their in They that of panel And so, couple And already which

won’t we than care make patients rest there it we it the were the out, able to work of won’t different and of so, And -- number patients for. look

big something one. expenditure $X But things million that the again, of do. in we’re So, will that on talking be for we about scheme

more strategy. there’ll not We’ll our think M&A. be that’s of do I like mean I ones so, that opportunistic. bigger are part much that a we small And core some

now, So, small strongly think I it’s activity. approach. about and an our the it. sales And marketing biggest extension remains this very itself that something I we’ll look feel -- think acquisitions the we But we always obviously presents these tuck-in always can almost about right of -- as at

Operator

of the line Lisa Gill Your Morgan. next JP question comes from from

Lisa Gill

just your around start to wanted comments I vaccinations. initial with Mike,

people an see many Street a about opportunities patients? And talk You said Can there’s existing vaccinated. tool? been Oak XXX,XXX you people how So, potential recruitment site. your bring of the in, have we if of those are

into So, And do fits but we’ve would past secondly, know I understand to over I your Canopy. question. how time? you your talked just be how that strategy want then, care, that telehealth really in and about telehealth first longitudinal see my the offering

Mike Pykosz

Yes.

to the COVID. communities the vaccinations, really first I them, the mean, vaccination because and communities first most hardest question helped positive some really hit the foremost impact it effort around of by and many On importantly, our of we’re we of proud serve,

we systems very providers Cook were with to place get were health to so, County, who them care really Xa hospital up, City were And glad doing of step on, we weren’t the early having care Chicago in -- were us trouble them big in. vaccinate places finding and health employed and help workers they we other to asked

nice So, glad did stuff weekend. we’re a put they on that and

it The with XXX,XXX about percentage it those of of become the people time and do serve. spend excited older a more effort. Oak more they historically, and Street, So, people patients. majority them the adults, Street, And who broad given obviously higher that Oak vast we think, I were are was the

making really one good it be reasons you in to is you’re efforts so, are effective why marketing And too prior of the taking our because something XXXX and were community so true, that sounds real.

to understand really so are The out it’s aren’t patients times, people that they for is right? it’s right? of they And ER that don’t going kind And they they something so type center short to hard right? shopping haven’t -- follow-up. And for the there, to health right, a Waiting accept our better -- care something the doctor, not the generally better, stocked them taking they weeks as for many part as kind of doctor’s consumer, that’s their helping to -- there’s prior are why low are but Oak that hospital office, X becoming and office realize them. qualified standard a just people challenge is a a need, the on part the system. get for that of us you’re a or their can’t Street. are just You this expectations of care They wait get while that appointments, have right? employments and can’t may appointments, of get

kind more and can more does likely should to are will them care the people how what Oak meet we they expect join -- importantly most Street what the people, need can really what And about pretty from overall and patients. are Patients that well-being. educate they of we so, improve their about educate them and

the see So, optimistic. I’m hopeful same thing and we’ll

I people right? the son, And Oak knew of some vaccinated because know really up when and they what’s they -- Oak got one right? do, you and the saying reinforce Oak This center special, about old we questioned how us vaccination at eyes first the starting impressed, She’s our real. they we why opportunity And like they were came how have Street. who Chicago your grew for at or what suburbs. standpoint. really time. things I our of from brand, continue what people that still We’re that, too should visited it I is centers really to from of area bragging weren’t guys, it much to centers the kind And nice, of already And telling opens realize my didn’t I am last wow, met Street. that them Street, in for so it see even surprised not about about they and I neighbors, you were our really message, But guys, the people not great why is people your seven the is to mom that But, think years. your when patients said, saying, I was. back was was far

now tip a that I is subside. telehealth about more we not what a tailwind will say, that But, educating Oak kind would to can telehealth hopefully -- two and question. urgent if first an that look continuing it’s purposes, wellness And the for option yes, the needs. And when It’s I On as at think this That’s to just in your so, think community people far is them, about Street, their working long-winded to growth. back I hope we our of think of COVID way right? -- for that I iceberg become patients, to Purpose it’s get around the it’s convenient also they for telehealth they longitudinal of check. a is kind number telehealth, want on-demand it. have for just really one is have as

in And our toolkit, experience to so, quality to they of meet improve patients are, their of it allow speak, kind of add our improve kind care. us so does where tools to and their more to

of of telehealth them right? thing a us and do things. that I And a provider are kind touch of do more there’s lot So, it not even interacting as up quick is right? when just visit, points, full more right? well-defined lets or to of a to kind right? that really about telehealth of on second the The ahead it’s business, a We intervening is open think the this it’s idea maybe efficiently But is driven with of patients about interaction, kind are to interaction still a care visit. because kind we’re and a you need about our things that some And Oak very getting that right? by one not breaking We billable. kind I that, build don’t Street manage there’s think necessary front, with that And what encumbered of the of by at want of care visits doctor, fee-for-service economics, we right?

blur a and it because and And you so, what’s a about I a that there think when more call lines phone between is person. someone great way, what’s not. telehealth personal you And actually for you can bringing a bit think between allows the visit in interaction

relative a coming in what tell business, now, do So us we want think for kind want, telehealth the very part it I nice I of larger more see patients what our don’t because our I right? continue of we who not of But, will that’s think aim preferred complement strongly patients we gives Part to us that about telehealth, strongly person. be is patients. due and think we have of to the telehealth portion model. and as younger, to time issues far in now serve, small if Our complexity that’s option you’re And to less to our have right do this, becomes with care. but I a -- so that’s due it from And feel the have think option, need of is more to more do. to a our fraction separate because But and as really very do I are really in more coordination using creating a telehealth demographic the first creating primary the fragmented we coordination; clinical people age fragmentation you are need care. of care opposite. you to patients We prevalent

have is have same we nurse why to team to option, going et plans, option we’re be aim in by a top different that’s telehealth so, person, the the of likely records, same kind telehealth care provider provides On them but central a access have of practitioner, right? that which to Canopy, that, will care more longitudinal urgent And same the of we’ll that cetera. kind

for across by experience, channels. coordinated create but seamless a And more environment we our care really so a and importantly, patients non-fragmented all these can that, doing

Operator

question line next from the of Your Lake Justin Research. Wolfe comes with

Justin Lake

lot’s few just I A equal. heard said that have being to you Hey. things I want correctly, but covered here, a sure Good all follow-ups. Mike, One, morning. I make been

kind to response increase going a as relative of economics? you centers to as what years next from think things I similarly of ‘XX similar center to was Bob’s in in could about long it terms the over couple question of think around growth, improving ‘XX, are we increased

Mike Pykosz

if back I can Yes. said. agree to it still. me, That I is get And right with you what

yes. think So, I

Justin Lake

Contracting. And on I then, wanted Direct follow good. up Good, to the

think said Contracting with that sounds aligned materially you was have the expect be the Specifically, an that in members Advantage. to Medicare economics to previously I claims And of to had be kind it entirety uncertain Advantage what -- relative Medicare were expected to you economics. Direct line now, like of you lower than

revenues kind of it that So, expect we that So, is to be what much of the that all better MA? to you’re out there? similar seeing kind

Mike Pykosz

as methodology more from and of understand both -- bunch kind a program a month we’re lot cost well now into we book, of yes, mean, as as similar the more with MA. data, it’ll revenue et like the from the mean, we’re got we’ve it, I on cetera. asterisks seeing et the of data, we that I into detailed a getting across program, we’re early the look initial what kind historical and feel to cetera,

Justin Lake

you real us of margin? be on this seeing of especially to you’ve ramp much those should there with the meaningful their know kind seeing tell running and of next something the that? kind what’s a be year, claims do Is expect of where we members, you been medial And going kind them those in couple a issues, of extent quarters, members, you Okay. be to on them aligned all should to able so when per

Mike Pykosz

Yes.

Justin, think a I it’s good question.

we -- we’re much how to think, point, this but components far different patient hear request, the going undecided break at and out different of I are and as we’ll I as kind groups. our patient

our will my And be our movement contracting what. exactly from contribution give so, going -- report to we’re costs, again, we’re all is, we don’t not know break think kind figuring things that’s to a -- So, book. MA that the granular we book. Again, X,XXX that’s still actuarially book the just sound and overall But, very right? I months on still we’re question. look want expectation historical not hear X,XXX I either, But to a of know by We the will how is of will small three like too driven some sense. patients out good revenue, us because There patients, numbers. similar

Tim Cook

the Yes. confirmed more specific through therefore, first that the think that our when been lot to to to Mike’s a tenure the of for as we in And economics was what takes we’ve rosters, higher document, patients years, of form program been look paid. number as we folks will have And understand as I flow We’ll direct these time. it’s gotten some this say. we’ve platform, And contracts take but Advantage seeing we few hard this mentioned patients health through well onto Maybe, hoped on we when gone I therefore, but a a talking through entirely that as seeing exactly Tim. Justin, see, patients, about think content be what one years, And what that to just be, while. cycles, way some a Medicare know if already earlier, as to months more conditions. I get then, -- patients flows actual opportunity of all -- in of we’ve time Direct I our type could data on to for had new positive Mike see have period direct the Contracting, Medicare that until started ago. it’s some It’s reimbursement in add the benefits, Advantage point. for patients And of economic we patients -- data are like on and annual what us -- And future understood able to patients could we’ve the data, and we we’ve been dynamic these could of into more their know, take on -- those convert that.

Operator

Your from from line next Anderson the of question Evercore. Elizabeth comes

Elizabeth Anderson

year? kind say anything first think of question and talked pacing cost But, would the of to sort you terms there the of we move of that we is cost the in is My in the thing. the else you as through care about, of through of some year, terms I that as I reopening of of move care

Tim Cook

openings. No, follow going new It’s I’d center Elizabeth, is this to say, timing -- Good morning. of the Tim.

the obviously, as going new we cost So, centers. incur open centers, within to those we’re associated

the would center the in latter half dollars And year. so, cost commensurately acceleration new to of with the of we care the that increase openings of expect

Elizabeth Anderson

through or then, care in -- Okay. thoughts That’s mix on you there changes your this And pandemic, whether shift as have helpful. areas, health front? mental or of specialty other specific of move about cardiology areas any of any very that any providing or kind any we kind are kind and

Mike Pykosz

Yes.

our amount patients already actually health care front. for provide we the of So, a mental on large

of We patients a specialists the program, with kind of social have ground, in clinical we’ll an have for and licensed kind integrated provide behavior psychiatry team including support there. psychiatrists and on of workers health we to our in-person them,

and things are year. into if we I model. one think cardiology would how things we specialist of have, I those pretty can cardiology. a like are is care. of about every So, do things cardiology we be already is guess it’s we core think dozens of because I care certainly, And that think -- we the primary close assessing. I is pillar And talked doing. our And have we’re pretty things, these next something earlier I really The it

the with ability nice of a eConsult kind of providing benefits group the Rubicon of have We’re to There’s a we working who having own work able our doctors being our specialist get them. job of very a a great specialist. consult who cardiology by we’re does to some one of with cardiology kind company called

cardiology the but needs run really so these especially to of person’s oftentimes, the to where less someone primary good conditions. with person not are you of of it’s something And newer more seen for kind got doctors a expertise, by and -- test have care be less is bit have a example condition cardiologists, who’s who the results want by kind that

leverage to that’s a business. And way eConsult great kind the of so,

But I could to conditions. volume do by revenue, something coordinated and it, on generate candidate, for Oak our we good Street. cost bring if be think or really lower care providing it’s those better over certainly to focused time, not to for -- a cardiology non-interventional it’s not

Elizabeth Anderson

use besides And is sense. of cardiology, of do in makes That it. it sort or that lot a area? Got you more focused anything for Rubicon

Mike Pykosz

much primary across candidates specialties. about of specialized that are eConsult. are again, And like care a think you ones the It’s type visit the it’s great more No. if for specialists,

just some across that need can specialists, it’s consultations, actually testing to a tool. -- certain it’s get but a great when see only we or you specialists specialist do, more procedures the So,

Operator

from from comes the next Your question Ransom line John of Raymond James.

John Ransom

if loss your your recognize, is higher you lag just example, terms population, How kind lag a of what and should in cost in quarter either lower in how true-ups ratio we or plan, with has some think March, an the on natural of P&L? good of about MA for based the -- your

Tim Cook

of Tim. that Hey those delayed going plan What would it’s on process we So, receiving file. a a plans from that the John, I a basis, receive right? is -- were is bit claims, on say data plans to claims obviously, and

just latency process. in natural there’s some so, And that

trends, accrue. work different. how might we’re do plans our the far just So, greater in see that Methodologies your data given say, plan a accrue volatility, patients months can markets. data type a more large across of millions That slightly the versus their with a how amounts set the depending that be I’d very day, And one the going the do basically or pertains to of approach for than to costs, have flow. we accruing same the roughly to size for different patients. of being the question, at-risk they’re the patients taking population At we’re factor it quality end XX,XXX different. to at fact respect challenges see it the also two be month data data, MA smaller might that is with at of of and we that That of but are a going upon we’re the at looking looking level what variability has to the there’s because whereas of national as plan said, be specific of smaller medical looking potential

population all when last remember, national Medicare patients So, to that it’s at-risk commercial and to for of that thing to comes far the a related large side, going Oak and so But, that. experienced we of our book The going might are seeing than other be is more even more it say seniors. in going be diversified on art different science, more -- health patients experience work payer versus might would might It’s -- to compared more Advantage market specific this plan, we’re just I course. it’s that is, that to the say a is be I’d be to a trends Street therefore, what have what

John Ransom

question. you. And Okay. follow-up a Thank just

like in war of some scarce talent pace people and you’re behavioral openings, your for Given a physicians with primary health. care assets respect psych, and to

Just the what’s past? staff of your point kind able of this in state world opportunity being of in to relative any terms to

Mike Pykosz

Yes.

to family a our provider group. they of to allows and a acquisition. best Oak to a I value our lot XX% do how or I patient about think in prop say, And and work a Oak regularly strong recommend say Street we work. have place it’s actually, very survey Street them We friend we we think believe one. for their to them need of team, member is And ways, XX% really them of similar

healthier. the keeping keep the we people, people people for help proposition should have clinicians they give and to those we to and into believe -- went value generate help into because our go to clinicians fee-for-service they strong do want and time want we them for they medicine them volume. because didn’t really to healthier, So, resources most They a that, medicine compensate

had some and that. And the want would our lot they say, really a we certainly model, of of the medicine appreciate differently. they great They hiring practice our Street the think Oak have I be part past understand really, them. best I So, clinicians to in clinicians because to success of want platform, and clinicians, to really

we think one of advantages that’s the I So, have.

and we of and or pick team their independent our the the can community attitudes on practitioner more who of to not model. because and day more kind able hire. there We we helping day, attract we’re nurse out to us, Oak that with and And our partner want encumbered more great relying just trying by. and We’re and And in and out think like talents the really purchase practice about why we’re is we’re from physician get in the kind the learn existing an every there world and to of best about the standpoint, a and whatever patient really we their to culture place choose people every we’re vision kind clinicians of Street and their awareness a work. exists

feel we know outstanding great feel about really talent if a we hire ability we I clinicians. good. war, would don’t it necessarily So, our call -- I but to

value an is have phenomenal. team. to keep the we prop them because for adding think, clinician I And that I amazing we’ll think

Operator

today’s time And concludes ladies questions. may for and for so gentlemen, that is disconnect. you conference have the Thank that all This we participating. call. much you And now

Oak Street Health (OSH) 11 May 212021 Q1 Earnings call transcript